ALBAPHARM PHARMACY ACQUISITION ASSISTANCE PACKAGE

STRATEGIC PARTNERS LEGAL - Holmes Mackillop LLP - Steve Williamson ACCOUNTING – Campbell Dallas LLP – Peter Gallanagh FINANCIAL – Statim Finance Unichem Customer Finance

THE CONTEXT Maintain strong Independent Sector to challenge Multiples Financial constraints – difficult for young Pharmacists to enter the market Credit Crunch is a further threat – but also a good opportunity for AlbaPharm An excellent Investment Opportunity for AlbaPharm and Private Investors

THE CONCEPT Close the Funding Gap Tax breaks benefit the Investor and the Pharmacist Mentoring and business support to create new profitable AlbaPharm Members AlbaPharm retains element of control until viability established Investment Panel reviews each case Looking for businesses with good growth potential

THE BENEFITS Investors get good return on investment Pharmacists acquire a business they could not obtain without support of AlbaPharm AlbaPharm supports new business entrants, maintains independent sector and builds/retains Members WIN – WIN -WIN

FRAMEWORK ALBAPHARM (AAH/UNICHEM) OP 1OP 2OP 3 PI Dividend Dividend out Shareholders Albapharm P1 AP Bank/Suppliers Guarantee Funders Shareholders OperatingPharmacies APP1 Albapharm Key OP means Operating Pharmacy AP means Acquiring Pharmacist PI means Private Investor

THE PURCHASE 1.PROPOSITION TO ACQUIRE 2.PROPOSAL VETTED 3.COMMERCIAL FUNDING IN PRINCIPLE 4.READY TO OFFER. STEPHEN WILLIAMSON PARTNER FOR HOLMES MACKILLOP LLP 35 WILLIAM STREET, JOHNSTONE, PA5 8DR TEL: Also at: 109 Douglas Street, Blythswood Square, Glasgow, G2 4HB Tel:

OPERATING PHARMACY 1.INCORPORATION OF OPERATING PHARMACY (OP) 2.OFFER FOR TARGET 3.ALLOCATION SHARES/FUNDING IN 4.ACQUISITION COMPLETED 5.FRAMEWORK (SHAREHOLDERS AGREEMENT/EXECUTIVE SERVICE CONTRACT) 6.ANNUAL TARGETS/REVIEW 7.BANKING OF RIGHTS TO ACQUIRE SHARES BY ACQUIRING PHARMACIST (AP) 8.PAYMENT OF DIVIDEND 9.EXERCISE OF OPTION TO BUY OUT 10.WHAT IF NO BUY OUT BY AP? 11.DISPOSAL OF OP BY ALBAPHARM & PRIVATE INVESTOR (PI) STEPHEN WILLIAMSON PARTNER FOR HOLMES MACKILLOP LLP 35 WILLIAM STREET, JOHNSTONE, PA5 8DR TEL: Also at: 109 Douglas Street, Blythswood Square, Glasgow, G2 4HB Tel:

Financial Implications Peter Gallanagh Campbell Dallas Chartered Accountants and Business advisors

Financial Implications Investor –EIS Relief –Corporate Venturing Operational Pharmacist –Initial Investment/ ‘Hurt Money’ –EMI Scheme –Access to Optional shares if excercises right to buy all –Good leaver/Bad leaver provisions

Financial Implications Management/Control –Monthly monitoring information –Benchmark information –Year end audit Win/Win Situation –Investor – decent return and protection –Operational pharmacist – Business otherwise couldn’t afford.

Financial Implication Acquire a pharmacy: –Turnover £1million, EBITDA £200,000 –£1.2 million cost. –Finance : Bank Funding £840,000, Operational Pharmacist £72,000, Investors £288,000 –Assume inflationary growth in turnover and EBITDA each year for 5 years.

Financial Implications Operational Pharmacist achieves targets of inflationary growth and EBITDA each year and hence has option to acquire further 30% at day 1 price. Can only do so if exercise right to Acquire all shares.

Financial Implications Returns for the investor: –Dividend each year assume to be at 4% of investment value. –Refund of tax equivalent to 20% of initial investment. –Capital gain – Tax Free. –Based on these numbers over the 5 year period and assuming no change in goodwill multiple return is approximately £270, Equivalent to an IRR of 27%

Financial Implications Operational Pharmacist –Pays an initial consideration for shares – “hurt money” –If achieves the targets then has the right to acquire additional shares at initial consideration price IF excercises right to buy all shares –Acquires remaining shares at market value at date of exercise. –Overall pays slightly more for the pharmacy than would have at the outset but gets a business that he otherwise would not have been able to afford.

Financial Implications This is a very good scheme for all. It will not suit all circumstances. Diligence exercise required – both financial and operation to ensure satisfactory. Need to set realistic and achieveable targets. Need to have an element of growth to ensure there is a satisfactory return for the investors. Need to ensure the business is cash positive to pay off loan and be able to gear back up to pay out investors. Investment appraisal critical and no one- fit all solution. Not Investment advice – speak to an FSA registered individual.